Microsoft has fixed a critical flaw in the Windows operating system that could be used by criminals to create a self-copying computer worm attack.

The software vendor released its first set of patches for 2008 on Tuesday, fixing a pair of networking flaws in the Windows kernel. Microsoft also released a second update for a less-serious Windows flaw that would allow attackers to steal passwords or run Windows software with elevated privileges.

The critical bug lies in the way Windows processes networking traffic that uses IGMP (Internet Group Management Protocol) and MLD (Multicast Listener Discovery) protocols, which are used to send data to many systems at the same time. Microsoft says that an attacker could send specially crafted packets to a victim's machine, which could then allow the attacker to run unauthorized code on a system.

Security experts say that there is no known code that exploits this flaw, but now that the patch has been posted, hackers can reverse-engineer the fix and develop their own attack code.

Because IGMP is enabled in Windows XP and Vista by default, this bug could be used to create a self-copying worm attack, Microsoft said Tuesday.

"Theoretically this is wormable and that's why this is rated critical," said Tim Rains, security response communications lead with Microsoft. However, Microsoft does not believe that hackers will have an easy time developing attack code that will work reliably. "We've done a thorough analysis of the vulnerability and we've come to the conclusion that there are several technical mitigating factors that make it unlikely to get reliable remote code execution," Rains said.

Windows uses the IGMP protocol for many popular consumer applications such as streaming video, multiplayer games and universal plug-and-play, but the protocol is usually blocked at the router. A derivative of IGMP, MLD is the multicast protocol used by IPv6 systems and is enabled on Vista by default

"If it became a worm it could take over an internal network pretty quickly, or at least all the machines where multicast is enabled," said Eric Schultze, chief technology officer with Shavlik Technologies. "But this one is going to be mitigated because a lot of people have blocked multicast."

The critical MS08-001 update that fixes this flaw also patches a second, less-serious bug in the Windows networking stack that could be leveraged to launch a denial of service attack against a Windows system. This vulnerability lies in the Internet Control Message Protocol Router Discovery Protocol (ICMP RDP) which is used by Windows to find out how to communicate with the network. Because this capability is not turned on by default, Microsoft considers this to be merely an "important" bug.

Microsoft's other Tuesday update, MS08-002, fixes an elevation of privilege flaw in the Windows Local Security Authority Subsystem Service (LSASS), used to manage account credentials in Windows.

This flaw could be exploited by attackers to steal passwords or run their code with a higher level of privilege on Windows, said Schultze. "The primary concern is Johnny who is a user becoming Johnny admin," he said. But if attackers were to combine an attack that exploited this flaw with another exploit that would allow them to run code on the system, then "that could become a critical issue," he said.